Monetary

Rewards
Aguinis et al.
Summary
• Monetary rewards can be a very powerful determinant of employee motivation and performance. However, monetary reward systems
do not always live up to expectations.
• What monetary rewards can and cannot do?
• Research-based recommendations about when and why monetary reward systems are likely to be successful in terms of enhancing
employee motivation and performance including;
• Five general principles to guide the design of successful monetary reward systems:
(1) define and measure performance accurately,
(2) make rewards contingent on performance,
(3) reward employees in a timely manner,
(4) maintain justice in the reward system
(5) use monetary and nonmonetary rewards.

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+ / - of Monetary Rewards

Pros Cons

▪ Performance improvements are high in a monetary incentive
intervention program compared to social recognition or
performance feedback instead.
▪ Benefits of monetary rewards seem to be global.
▪ Monetary rewards do not always lead to desirable outcomes.
▪ They sometimes fail to motivate and may even lead to
counterproductive outcomes such as financial misrepresentation
activities
▪ If high amounts of monetary incentives are promised, employees
can ‘choke,’ or suffer declined performance levels as a result of
sharply increased fear of failure.
▪ Employees can develop a sense of entitlement to certain amounts
of payouts and, as a result, actual payouts that fall short of their
expectations can cause various negative reactions such as pay-
level dissatisfaction and intentions to quit the organization.

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What monetary rewards can / can not do and why
Can
▪ Organizations that provide higher pay levels and tie pay to
individual performance enjoy high levels of return on assets.
▪ They attract and retain top performers is that they help meet
a variety of basic needs (e.g., food, shelter) and also higher-
level needs (e.g., belonging to a group, receiving respect
from others, achieving mastery in one’s work)
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Can not
▪ Monetary rewards do not improve employees’ job-relevant
knowledge, skills, and abilities (KSAs). (Individual performance is
determined by both motivation and KSAs)
▪ Monetary rewards do not necessarily improve the quality of jobs. (It
enhances with; the level of autonomy and participation in decision-
making)
▪ Monetary rewards do not have a built-in mechanism that prevents
such rewards from unintentionally encouraging unethical and
counterproductive employee behaviors.
Best-practice recommendations on how to use monetary
rewards effectively

Countries such as the United States and

Australia, which are more individualistic,
place great value on individual achievement.
Alternatively, people in countries such as
China and Guatemala, which are more
collectivistic, place great value on group
identification. Rewarding team performance
should be necessary for them.

A performance management system involves

ongoing and regular evaluation, feedback,
and developmental opportunities

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Best-practice recommendations on how to use monetary
rewards effectively
Distributive Justice
Procedural Justice
Procedural Justice
Interactional Justice

Examples of nonmonetary rewards: valuable

training and development opportunities,
offered as rewards for good performance,
rewards include formal commendations and
awards, a favorable mention in company
publications, receiving praise in public, letters
of appreciation, status indicators such as an
enhanced job title, a more flexible work
schedule, greater job autonomy, paid
sabbaticals, more interesting work, include
training and development, tuition
reimbursement, coveted parking spaces, a
gym membership, a new piece of furniture,
going to social events or vacations with
coworkers, and even an opportunity to get out
of one’s least favorite project

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